UltraTech, Ambuja, ACC, others : 3 factors that may keep earnings for cement makers under check

Stock Market Today: UltraTech Cement, ACC , JK Cement , Ambuja Cement , Shree Cement JK Lakshmi Cement share prices have seen sharp 2-13% correction during last one month. The weak sentiments towards Cement manufacturers while are being led by progressing monsoon season that impacts the construction activities , nevertheless there is more to it .

Here are three key reasons that may keep cement maker earnings under check

1.Weak Cement prices- The average all Indian Cement prices during the June quarter, had declined by 1% sequentially and by 4% on an annual basis, as per analysts data. The analysts say that the prices had weakened significantly by end of the quarter. The Cement prices during the ongoing quarter are likely to have dipped further and July August average price is at least 3% lower over the June exit price.

Analysts at Jefferies India Pvt Ltd in their mid August report said that Cement price has only worsened in Q2 to multi-year low (lower an incremental 3% quarter to date sequentially). The several industry participants are now shadowing doubts on the possibility of even post monsoon hikes, they highlighted

2. Rising Input costs to keep profitability under check

While cement prices have been declining, however the benefits of any decline in input costs are also behind say analysts. This will impact profitability further. Mangesh Bhadang Research Analyst at Centrum broking said that " Cement prices have been on a downward trend for almost a year now which has affected the profitability of the cement companies. Operating cost decline driven by power & fuel costs is likely to halt, as most of the low cost advantage is already absorbed.

3. Capacity Expansions to keep prices under check-

Cement companies are undertaking significant capacity expansions. As per Crisil Research, driven by a robust demand forecast and a hunt for market dominance, Indian cement makers plan to undertake capital expenditure (capex) totaling around Rs. 1,25,000 crore over the fiscal years 2025–2027.

The Capacity expansions are likely to start coming on stream by Q4FY25 and this will mean that manufacturers trying to gain market share will not be aggressive on pricing. This remains another concern of investors. Bhadang says that consolidation in the industry is expected to bring pricing discipline in the long run, in the looking at near term aggressive capex announcements, we expect supply to outstrip demand and put pressure on realizations.

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